The Sydney and Melbourne auction markets strengthened this weekend despite a surge in listings.

Both markets have recorded solid clearance rates this year, but the weekend loomed as the first real test of 2013.

Sydney's 513 listings for auction and Melbourne's 959 were double the numbers offered for sale the previous weekend and higher than the same weekend last year.

However, the two cities recorded strong clearance rates. Sydney's 76.3 per cent is the highest rate for years and reflects boom-time activity similar to the market in 2010. It follows a rate of 71.6 per cent the previous weekend and indicates growing market momentum.

Advertisement

For the same weekend last year the clearance rate in Sydney was 56.6 per cent, showing how far the market has come over the past year.

There are also signs of a more generalised upswing, with increased buying in the recently dormant prestige market. Eight properties were reported sold in Sydney with a value above $2 million, including one sale of $3 million and another of $5 million.

The inner west remains the auction hot spot, with the highest regional clearance rate of 83 per cent – and this from the highest number of listings.

The median price for houses reported sold in the inner west at the weekend was $983,750; for units it was $573,000.

The highest reported sale in Sydney was a six-bedroom house in Vaucluse that sold for $5.15 million. The lowest reported sale was a three-bedroom house in Carramar for $368,000.

Like Sydney, Melbourne recorded its strongest result since the house price boom of 2010 despite a high number of listings. And like Sydney the weekend's 71.6 per cent clearance rate was significantly higher than the rate recorded a year ago on the same weekend.

Signs are emerging in Melbourne that the buyer momentum in the prestige market through most of last year may be spreading to mid-range price sectors, particularly in the eastern suburbs.

It's no secret or surprise that the stronger housing markets in Sydney and Melbourne are being driven by historically low interest rates and rising confidence.

The heating up and the inevitable price rises that will follow will provide the Reserve Bank with a conundrum given signs of continued weakness in other sectors of the economy.

Dr Andrew Wilson is senior economist for Australian Property Monitors.